Putting the development in brownfield redevelopment
Brownfields are major environmental programs for the U.S. Environmental Protection Agency (EPA) and their state counterparts and major opportunities for enterprising real estate developers willing to face the complicated world of public-private initiatives. EPA launched its national brownfield pilot grant program in 1995 and has since funded more than 300 municipal, county, regional or tribal organizations to organize and implement local programs dedicated to brownfield restoration. EPA defines brownfields as "abandoned, idled or under-used industrial and commercial facilities where expansion or redevelopment is complicated by real or perceived environmental contamination." EPA is also providing various forms of technical assistance to local brownfield agencies. This October, EPA will hold its fifth annual brownfield conference in Atlantic City Brownfields 2000.
In many ways, state governments have gone even further than EPA in facilitating the redevelopment of abandoned or under-utilized brownfield sites. More than 40 states have some form of brownfield programs, with the major industrial states generally taking the lead in innovative and progressive measures designed to overcome environmental issues and financial obstacles to stimulate restoration and redevelopment.
States are providing financial incentives through grants and low-cost loan programs. Some states provide cleanup reimbursements funded by taxes generated through the restored property. Financial incentives may be available to municipalities, to private owners and developers or both. States are granting limitations to owners' legal liability, including innocent purchaser provisions and covenants not to sue. Some states are building flexibility into their requirements for regulatory compliance for brownfield properties contaminated with hazardous substances, including use of engineering and institutional controls, risk assessments and risk-based cleanup standards.
Figure 1 summarizes information published late in 1999 by the Northeast-Midwest Institute characterizing the brownfield programs of eight major industrial states.
As states, counties and municipalities deal with sprawl and growth management issues, they are recognizing that urban and suburban brownfield redevelopment meets their land use policy objectives far better than rural "greenfield" development because these sites have tremendous economic potential due to their proximity to existing infrastructure. The next set of state brownfield initiatives may well come as a result of regional and state "smart growth" initiatives.
Redevelopment projects do not succeed unless the end user can be identified, targeted and brought into the project.
One of the challenges to brownfield redevelopers is the wide range of participants or "stakeholders" who have a legitimate place at the table when considering redevelopment plans. Experience teaches us that successful redevelopment occurs at significant brownfield sites in the context of the formation of a private-public partnership. This partnership is likely to include a large number of stakeholders, many of whom may not be involved in industrial site remediation without simultaneous redevelopment, just as some of the stakeholders are not likely to be involved in a more traditional "greenfield" development project absent the element of remediation. Figure 2
details major stakeholders likely to be involved in complex, large-scale brownfield redevelopment projects.
We can see from the listing of stakeholders that there is a wide diversity of interests who have to be represented in the brownfield redevelopment process, and it is evident that it is the developer, normally a private sector, for-profit business entity/entrepreneur, who must be at the heart of the urban brownfields redevelopment process.
Enter the developer
In the public-private brownfield process the ultimate goal is redevelopment. Development, or in this case redevelopment, is the business of an often misunderstood and maligned business person or company the developer. What does the developer contribute?
Vision. Developers provide the vision and the know-how that turns green pastures into the instruments of economic growth: housing, offices, industry or retail shopping. Appropriately, in the case of urban brownfield sites, it is the developer who transforms a contaminated, under-utilized, blighted urban site into a renewed contributor to an economic and social infrastructure. At a minimum, a developer must have a vision for the future. At their best, developers have a plan for better cities, better neighborhoods and a better quality of life.
Financing. The development industry depends on outside financing from lenders, investors, and from Wall Street in the form of real estate investment trusts (REITS). REITS are publicly-owned financial funds that invest in and manage commercial and industrial properties. Developers spend much of their energy in formulating the financial plan and raising the money for land acquisition and construction. At brownfield sites, the financing task is made significantly more difficult by the uncertainty and risk associated with the environmental liabilities from hazardous substances used and discarded in years past.
Assumption of risk. All real estate developments are risky since real estate markets change, interest rates rise and fall and construction contingencies abound. Brownfield developments, however, add additional layers of risk due to environmental and regulatory uncertainties. Non-risk-takers do not become real estate developers.
Land planning. The developer creates a plan that will attract tenants or buyers, enable the funding of the project and secure all necessary municipal and regulatory approvals. Complex as this may seem, at brownfield sites the plan must also account for environmental hazard reduction, remediation and compliance.
Design and construction. Complex development projects, such as brownfield redevelopments, require specialized design, construction and project management skills. The calendar is key. Once a project has its approvals and financing, time is essential. The successful brownfield developer assembles a team of talented professionals who turn the vision into the realty of concrete and steel, infrastructure and open space.
Redevelopment projects do not succeed unless the end user can be identified, targeted and brought into the project. Many large-scale urban brownfield projects are multi-use, thereby requiring the developer to line up and negotiate with retail, office and industrial users, transportation and open space agencies, utility companies and a myriad of municipal and neighborhood economic development interests. In the end, the project will be successful if it provides a higher quality of life for the community and is economically viable for those entities that occupy the redeveloped land the end users.
The development industry represents the single most important private sector factor in the brownfield redevelopment equation.
The sustainable brownfields redevelopment process was initiated by the American Society for Testing and Materials (ASTM) and EPA as a means for producing livable communities by building community capacity and developing local partnerships to drive the urban brownfield redevelopment process. Developers experienced at brownfield sites in urban communities have come to learn the importance of integrating the grass roots community and neighborhood stakeholders into the redevelopment process. Recognizing this need, in 1999 EPA assisted in and funded the formation of the Partnership For Sustainable Brownfields Redevelopment, a multi-stakeholder group representing developers as well as environmental professionals and environmental justice advocates.
Looking toward the future
EPA and individual states have successfully launched the brownfields redevelopment concept within the environmental community. One needs to only count the number of brownfield seminars, workshops and trade shows now regularly conducted for proof. Many local governments have embraced brownfields as a tool for economic development, as a way to improve the quality of urban life and as a means for ridding their communities of the destructive blight created by the decay and contamination associated with abandoned or under-utilized industrial and commercial properties.
One just has to look at EPA's brownfields budget for fiscal year 2001 and other monies awarded to see that the federal government is committed to brownfield redevelopment. EPA's budget for fiscal year 2001 is estimated at $90 million. In addition, as of May 2000, there have been 56 new brownfield pilots awarded at $200,000 per pilot, 30 new brownfield cleanup revolving-loans pilots at up to $500,000 per pilot and 16 new brownfield job training and development pilots at $200,000 per pilot. We expect the government to continue providing various sources of funding for brownfield redevelopment in the future.
It is widely acknowledged that the ultimate success of the brownfields redevelopment movement lies in the partnership between public agencies and private business. The development industry represents the single most important private sector factor in the brownfield redevelopment equation. Led by progressive industry groups such as The National Association of Industrial and Office Properties (NAIOP), developers are now seeking brownfield properties where once they shunned them and are learning how to integrate site remediation and community interests into their vision for the restoration of older, blighted urban industrial cities. These are exciting times for the environmental professionals who design and restore contaminated industrial sites and for the development industry leaders who are truly putting the development in brownfields redevelopment.
Northeast Midwest Institute www.nemw.org
U.S. Environmental Protection Agency (EPA) www.epa.gov/swerosps/bf
National Association of Industrial and Office Properties (NAIOP) www.NAIOP.org
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This article appeared in Environmental Protection magazine, August 2000, Vol. 11, No. 8, p. 30.
This article originally appeared in the 08/01/2000 issue of Environmental Protection.